Tuesday, June 9, 2015

Lessons of Moore's-Law History 3: The Consumer is the Chasm

In the previous two blog posts, we have seen (hopefully!)
the importance of betting on technologies and suppliers that most closely
resemble the silicon-transistor-chip evolution process, and the need to bet on
suppliers adhering to that process that emphasize infrastructure software
combining openness to technology evolution with support for existing systems –
but we have not dealt with the “chasms” that occur when Moore’s-Law evolution
results in new, radically different higher-level technologies.

Here I am combining two books popular back in the
1990s:Crossing the Chasm, by Geoffrey
Moore (no relation), which talked about how innovative startups bridged the gap
between early techie adopters and the bulk of the market; and The Innovator’s
Dilemma, by Clayton Christensen, which argued that “disruptive innovation”
driven by new technologies would over time change existing markets profoundly,
usually to the detriment of larger, well-entrenched companies presently
dominant in an industry.In an industry
like the computer industry (including software and services), where Moore’s Law
drives a more rapid pace of underlying improvement to platforms, entrenched
companies must often react to disruptive innovation by “crossing the chasm”
rapidly with their customers to the new technology, else they risk losing their
markets and their ability to survive.

When A Company Is Ultimate-Customer-Blind

The 1990s and early 2000s gave us a good set of data on who
succeeded and who failed in “crossing the chasm.”The results were surprising to many.It seemed reasonable that a Sun or an Oracle
would surpass a Microsoft, that a Digital Equipment would beat a Novell, that
an IBM would dominate a Compaq or a Dell in the PC market.And yet, here we are 25 years later, and by
no stretch of the imagination can we say that these things happened.

It seems to me that a common theme of this litany of
successes and failures at adapting to new Moore’s-Law technologies is that
companies that sold to the business market failed far more often than companies
that sold to the consumer market.Sun,
which did a superb job jumping from the workstation to the server market,
failed among other things to note consumer-driven Linux/Windows open-source
software that was undercutting its prices and playing better with the server
farms that later led to public clouds.IBM’s initial great Charlie-Chaplin PC marketing fell before the
next-day delivery and Intel allegiance of Dell and Compaq.On a smaller scale, we saw Informix’s
Oracle-protected VAR channel fail fatally when Informix failed to reach through
that channel to detect that the servers it was shipping to VARs were no longer
being bought at a comparable rate by the ultimate customers.

On a longer time scale, the proprietary chip sets of IBM,
HP, and Sun/Oracle have steadily lost ground compared to Intel markets.It may seem logical that IBM over the last
few years is walking away from the PC, starting with its consumer PCs/laptops;
but that approach has steadily given it less and less sense of trends in the
consumer market, and that, Moore’s-Law history would suggest, is
dangerous.It was once assumed that
one’s employees would buy consumer versions of what a business-focused computer
company offered; but, starting in the 1980s, the opposite has appeared
true:Word/Lotus, Excel, presentation
software, laptops, smartphones, and social media have all been imported into
businesses before and despite corporate standards.If a computer company wishes to handle a
disruptive innovation, Moore’s-Law history suggests, it must immediately sense
the consumer movement, and then follow the consumer across the chasm, and
quickly.

The Top Line is Now the Bottom Line

From 2008 on until fairly recently, a focus on cutting costs
allowed companies like IBM, Oracle, and HP to look good to Wall Street although
revenues were slightly down to slightly up.Now, however, the contrast with consumer-focused companies like Google,
Amazon, and Apple that continue to grow revenues by leaps and bounds is
becoming all too obvious, and the chasm to cross to support the new mobile and
cloud technologies is becoming wider by the day.Generalizing to other industries, it is not
enough to keep in sync with a Moore’s-Law-related process and focus on
flexible, forward-compatible software.One should also focus on growing top-line revenues by crossing the chasm
with the customer.

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Wayne Kernochan

About Me

I have recently retired. Before retirement, I was a long-time computer industry analyst at firms like Aberdeen Group and Yankee Group, and before that a programmer at Prime Computer and Computer Corp. of America. Sloan/MIT MBA, Cornell Computer Science Master's, and Harvard college degrees. Used to play the violin, and have written unpublished books about personal finance, violin playing, and the relationship between religion and mathematics, as well as three plays, two musicals, a screenplay on climate change, short stories, and poetry. I intend to use this blog in future both to continue to enjoy the computing field and to pursue my interests in many other areas (e.g., climate change, history, issues of the day).